2016 (2) TMI 1095 - AT - Income Tax

Reopening of assessment - Held that - What the AO is now seeking to tax the amount is on the basis of change of opinion and it is not permissible, as the AO has accepted the same and completed the assessment in terms of Section 143(3). Moreover, as already stated earlier, the reopening is after 4 years and there is no failure on the part of the assessee to make full disclosure. On the same material furnished by assessee, the reopening was done, which cannot be sustained. There is neither any discussion about the submissions made by assessee nor about the satisfaction recorded by the AO nor about the objections raised by assessee in the re-assessment proceedings on jurisdiction. In fact, Ld. CIT(A) did not even comment about the veracity of reopening of the assessment. As seen from the later part of the order, he did not even examine whether the AO made addition or disallowed expenditure. AO brought an amount of ₹ 15,77,330/- to tax as an addition under the head income from other sources, even after accepting that an amount of ₹ 1,50,300/- pertains to a firm. Without even understanding whether the amount was an addition to the income returned or disallowance of the expenditure claimed, the Ld. CIT(A) confirms the disallowance made by the AO. This shows not only the non-application of mind by the CIT(A), but also total ignorance of facts and law on the matter under consideration. In our opinion it is the CIT(A) who took hyper technical view and not assessee.- Decided in favour of assessee.

Summary

Issues:
Reopening of assessment after four years under section 143(3) of the Income Tax Act.

Analysis:
The issue in this appeal pertains to the reopening of assessment after four years following the completion of assessment under section 143(3) of the Income Tax Act. The Assessee contested the rationale behind the reopening, arguing that the Assessing Officer had already inquired into the matter in question during the original assessment. The Assessee, an individual, initially declared an income of Rs. 5,62,047. The Assessing Officer, during the scrutiny assessment, raised queries regarding deposits in the Assessee's bank account. The Assessee explained that a friend had opened the account due to issues with their own account. The assessment was completed by the Deputy Commissioner of Income Tax, Circle-I, Karimnagar, without any additions based on the information provided. Subsequently, the same information led to the reassessment after four years, where the Assessing Officer disallowed a significant amount as income from other sources, despite acknowledging that a portion of it pertained to a firm. The Assessee challenged the reassessment, questioning its validity and the addition made.

The Tribunal analyzed the case, emphasizing that the original Assessing Officer had thoroughly examined the bank account deposits and was satisfied with the Assessee's explanation, leading to the completion of assessment without any additions. The Tribunal highlighted that reopening an assessment after four years requires the Assessing Officer to establish that income chargeable to tax had escaped assessment due to the Assessee's failure to disclose material facts. The Tribunal cited legal precedents to support the view that reassessment based on a mere change of opinion is impermissible. Additionally, the Tribunal referred to a judgment by the Gujarat High Court regarding the jurisdiction of reopening assessments beyond four years. The Tribunal concluded that the reassessment in this case was unjustified, as the Assessing Officer had already accepted the Assessee's explanation and completed the assessment under section 143(3). The Tribunal criticized the Commissioner of Income Tax (Appeals) for not properly addressing the Assessee's submissions and objections, ultimately allowing the Assessee's appeal and setting aside the reassessment order and the CIT(A)'s decision.

In summary, the Tribunal ruled in favor of the Assessee, holding that the reassessment conducted after four years was based on a change of opinion and lacked justification. The Tribunal found that the original assessment had been completed satisfactorily, and there was no failure on the Assessee's part to disclose relevant information. The Tribunal criticized the CIT(A) for not adequately considering the Assessee's arguments and objections, ultimately allowing the Assessee's appeal and setting aside the reassessment order and the CIT(A)'s decision.